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Company Tied to Payroll Project Shuts Down

By David W. Chen June 1, 2011 2:41 pmJune 1, 2011 2:41 pm

WAYNE, N.J. — A New Jersey technology company that had been a major contractor on the Bloomberg administration’s troubled CityTime payroll project abruptly halted operations and terminated its employees amid a widening city and federal investigation, according to a company memorandum sent out this week.

The top two executives of the company, TechnoDyne L.L.C., have returned to their native India, according to people familiar with the case who were not authorized to speak publicly because the investigation was continuing.

Whether the executives — Reddy and Padma Allen, American citizens who are husband and wife — will return is unclear. They are alluded to but not identified by name as co-conspirators in a federal complaint that was made public on Friday; neither they nor their company has been charged.

The sudden demise of TechnoDyne, which according to earlier company statements had 500 employees and $100 million in annual revenue, means that for the first time, the scandal adversely affected a substantial number of people who may have been simply associated with a CityTime contractor, and not necessarily involved in the project.

The United States attorney’s office in Manhattan and the New York City Department of Investigation have accused several employees of CityTime contractors of defrauding the city in an $80 million scheme that began in 2005. But even before the accusations, the automated payroll project had become a liability for Mayor Michael R. Bloomberg because of its costs, which have climbed to about $700 million after an initial estimate of $63 million.

On Friday, investigators charged the project’s senior manager, Gerard Denault, with receiving over $5 million in kickbacks, as well as wire fraud conspiracy and money laundering. Mr. Denault urged his employer, Science Applications International Corporation, to hire TechnoDyne as the project’s main information technology subcontractor.

TechnoDyne, based here, received $464 million out of $628 million that was paid to Science Applications International. According to the complaint, TechnoDyne funneled $5.6 million to a sham consulting company owned by Mr. Denault via three companies affiliated with TechnoDyne, including one owned by Padma Allen’s mother, and two others in India.

The complaint said there was evidence that TechnoDyne tried to “conceal its interest” in one of the Indian companies, “and thereby its connections to the millions of dollars that were being paid to Denault.”

By Tuesday night, as TechnoDyne employees, concerned that the company’s Web site and switchboard were not working, began contacting reporters, the company had issued a memorandum.

Sent to The New York Times by an employee and signed by its human resources department, the memorandum said that “due to legal action recently taken against TechnoDyne by a governmental authority,” the company was “unable to continue normal operations” and was immediately “terminating the services of its employees and consultants.”

The company, which investigators said relied on Science Applications International for 80 percent of its revenue, pledged to cooperate with immigration lawyers to help workers who have H-1B visas or green cards. The company also said it would keep employees updated on compensation, health insurance and other issues.

A spokeswoman for the company did not respond to phone calls and e-mails to her. Meanwhile, a visit to the company’s two addresses here on Wednesday — one in an office park, the other at a U.P.S. store — did not reveal any activity or presence, other than the company’s name tacked onto a building directory. One person who works in the office park said few people had shown up to TechnoDyne’s office in recent months.

TechnoDyne billed itself as an information technology consulting company that helped governments and private businesses with software development and cloud-computing management.

The company also enlisted prominent lobbyists in the city procurement process, including Gino P. Menchini, a former commissioner at the city’s Department of Information Technology and Telecommunications, and Agostino Cangemi, a former deputy commissioner at the same agency.

A spokeswoman for Mr. Menchini’s and Mr. Cangemi’s current company, National Strategies, said that the company never worked on CityTime, and that once the TechnoDyne accusations were known on Friday, the contract between National Strategies and TechnoDyne was terminated immediately.

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